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Issues: Whether cheques issued as advance payment at the time of entering into a contract for supply of goods constitute cheques issued in discharge of a legally enforceable liability so as to attract Section 138 of the Negotiable Instruments Act.
Analysis: Where advance payment is a condition of the contract, the purchaser incurs a liability to make such payment even if the goods are to be procured or manufactured later. A cheque is a mode of payment and may be issued against a liability, not merely against an already crystallised debt. Once the seller acts upon the contract and procures the goods on the strength of the cheques, the purchaser's liability becomes fastened. The issue whether the complainant ultimately proves the liability or the effect of stop-payment instructions is a matter for trial and cannot, at the summoning stage, justify setting aside the complaint proceedings.
Conclusion: Such cheques are issued against a liability and the ingredients of Section 138 of the Negotiable Instruments Act are attracted. The order setting aside the summoning order was unsustainable.
Ratio Decidendi: A cheque issued as advance payment under a contract, and acted upon by the payee by procuring goods or manufacturing them, is a cheque issued in discharge of a legally enforceable liability for the purposes of Section 138 of the Negotiable Instruments Act.
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